Expenses increase $50M in two years
The Cayman Islands government’s 2012/13 spending plan depends on a 20 per cent, one-year growth in revenues to make ends meet, according to government budget documents released last week.
The proposal, likely to be approved in Legislative Assembly this week, also requires a total of $91 million in overdraft facilities, also known as transitional or “trans” borrowing, to cover expenses during the lower-earning months of the fiscal year.
Central government expenses are forecast to be $567 million for the year, while revenues are forecast to come in at nearly $650 million.
“The [revenue] amount represents a growth of 20 per cent when compared to the $544.1 million in revenue forecast for the 2011/12 year,” budget documents state. “The forecast is based on enhancement to current revenue streams and new revenue measures totalling approximately $90 million.”
The new fees and charges, according to earlier statements by Cayman Islands Premier McKeeva Bush, include higher fees for work permits, increases in stamp duties on certain real estate purchases, and increases to certain fees in the financial services sector, among other revenue streams.
The central government expenses of $567 million are made up of $251 million in personnel costs, $95 million in supplies and consumables [including costs for government building leases], $25 million in depreciation expense, $33 million to finance borrowing costs, $108 million in outputs purchased from statutory authorities and government-owned companies, and nearly $19 million in outputs purchased from non-government suppliers.
Economists generally refer to the $127 million paid for the last two items as the government’s “subsidy” to statutory authorities, government companies and non-governmental suppliers.
In addition to those expenses, $32.8 million in “transfer payments” are budgeted in the 2012/13 spending plan. Those include $14.6 million in scholarships, educational support and nation-building programmes, $8.7 million in poor relief and children or family services assistance programmes, $5.6 million in ex-gratia payments to seamen, $1.3 million in benefit payments to ex-servicemen, $890,000 in housing assistance and $264,600 in support to local business associations, among other expenses.
“The government made significant efforts to restrict expenditures,” the budget statement noted. However, rising health care costs, the need to contribute to government worker past due pensions [nearly $17 million], and the ongoing implementation of the constitution, which was expected to cost more than $32 million before work was completed, all served to increase costs, government noted.
Unaudited figures for central government expenses during the 2011/12 budget year were $554 million, while figures for the 2010/11 year were $512 million.
In addition, the government plans to make $53.2 million in capital project investments during the year.
That amount breaks down in part as follows: $13.9 million for various education-related construction projects, mostly for the new government high schools; $10.5 million for debt servicing and operations at the Cayman Turtle Farm, $5.1 million to Cayman Airways to continue paying off the “shareholder deficiency”, $4.5 million on construction of new roads and $2.2 million spent to settle claims for gazetted properties taken for public road works.
Because of the increased government revenues, the budget is projected to be in much better shape at the end of the fiscal year, 30 June, 2013. However, budget documents indicate government will still not meet debt-to-revenues ratios, nor will it meet requirements for cash reserves set out in the territory’s Public Management and Finance Law. That means the United Kingdom will maintain significant control and influence over its territory’s public sector spending.
There is no long-term borrowing contained in the 2012/13 government budget, indeed the UK has forbidden that for Cayman until after the 2015/16 budget – four years from now.
However, some short-term borrowing, or “overdraft facilities” as the government terms them, are required to over costs within the budget year.
According to budget records, a $66 million overdraft facility will be required between 1 July, 2012, and 31 January, 2013, as a “temporary facility to cover cash flow needs”.
That means government intends to pay back the amount when cash receipts from the high-earning revenue months of January through April start coming in.
An additional overdraft facility of $25 million is set to cover 1 February, 2013 to 30 June, 2013 – through to the end of the fiscal year.
Most of the short-term borrowing costs will be covered by the government’s anticipated operating surplus of $82 million, government ministers said last week. The central government’s borrowing balance at the end of the budget year is expected to be around $575 million that is still owed in previous financing costs.
The entire public sector budget, including money earned by statutory authorities and government-owned companies is $834 million in revenues and about $752 million in operating expenses.
The total public sector borrowing balance at the end of the year is expected to come in at $713 million still owed.
Government’s net worth at fiscal year end is expected to be $637.7 million.